Consumers misunderstand types of advice
The need to be studious about our financial future never goes away and ASIC is pushing hard to help us all understand this. Advice is very important but so to is having a good understanding of what is being proposed.
The latest Australian Securities and Investments Commission (ASIC) research has revealed a basic misunderstanding among consumers of what constitutes general financial advice and what constitutes personal financial advice.
Commenting on the corporate regulator’s “Financial advice: Mind the gap” report, ASIC deputy chair Karen Chester said: “This disturbing gap in understanding whether the advice they are getting is personal or not means many consumers are under the false premise their interests are being prioritised, when no such protection exists.”
Results of the study showed 53 per cent of respondents correctly identified general advice and 40 per cent of those surveyed incorrectly believed the adviser had an obligation to take their personal circumstances into account when providing general advice.
The regulator has identified this lack of knowledge regarding the different types of advice as presenting significant risk to consumers as with the continued evolution of financial products.
“ASIC is seeing increased sales of complex financial products under general advice models – so not tailored to personal circumstances – leaving many consumers, especially retirees, exposed to the potential risk of financial loss. And while the financial services royal commission and the government’s response dealt with the most egregious risks of hawking of complex financial products, consumer confusion about what is personal and general advice needs to be addressed,” Chester said.
ASIC said it regards the results of the report as a reinforcement of the Financial System Inquiry findings that found the use of the term general advice is likely to lead to unrealistic consumer expectations about the value and level of protection available to them when seeking financial planning services.
“This consumer research is timely. It comes as the government is considering policy recommendations on financial advice from the Productivity Commission’s twin reports on Australia’s financial and superannuation systems. And at a time when the financial system itself undergoes much change, following the intense scrutiny of the financial services royal commission, including considering new financial advice and distribution business models,” Chester said.
The study was conducted by independent firm Whereto Research and asked participants to identify what type of advice was being provided in hypothetical situations.
Darin Tyson-Chan
March 28, 2019
smsmagazine.com.au
Hot Issues
- ATO encourages trustees to use voluntary disclosure service
- Beware of terminal illness payout time frame
- Capital losses can help reduce NALI
- Investment and economic outlook, August 2024
- What the Reserve Bank’s rates stance means for property borrowers
- How investing regularly can propel your returns
- Super sector in ASIC’s sights
- Most Popular Operating Systems 1999 - 2022
- Our investment and economic outlook, July 2024
- Striking a balance in the new financial year
- The five reasons why the $A is likely to rise further - if recession is avoided
- What super fund members should know when comparing returns
- Insurance inside super has tax advantages
- It’s never too early to start talking about aged care with clients
- Capacity doubts now more common
- Most Gold Medals in Summer Olympic Games (1896-2024)
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
- Downsizer contributions can be time critical
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
- January - March 2015
- October - December 2014
April - June 2019 archive
- Recession on our mind
- What it will take to close the super gap between men and women
- Australia - How are we going as 2018-19 ends?
- LRBAs, guarantees in need of review after property market falls
- Average age for establishing SMSFs sitting at 48.9: Report
- ATO updates valuation guidelines for pension reporting
- ATO figures show jump in starting balances for SMSFs
- Your personal financial register
- Australia’s $4bn Super blackhole impacting self-employed most
- The proper help can be a benefit - age pension
- SMSFs on ATO’s radar in cryptocurrency review
- Limited recourse borrowing arrangements - LRBAs
- What a financial planner does to help.
- Goodbye to ad-hoc portfolios
- Wanted: More voluntary super contributions
- Australia by the numbers – May Update
- Federal Budget 2019 - Overview
- How the 2019 Federal Budget affects you
- The problem with getting to 53 years of age.
- Paying for health care in retirement
- Personal super contributions and the 10% test
- What investors can expect as key moves affecting markets await
- ATO flags PAYG obligations for SMSFs with legacy pensions
- Don't just plan for retirement; Plan for your life
- Consumers misunderstand types of advice
- Budget Time - How's Australia going?